Heffernan calls for tax crackdown

The federal government should launch a major review of the tax treatment of foreign investment to crack down on sovereign and private companies using legal loopholes to escape paying hundreds of millions of dollars in taxes, a cross-party Senate committee has urged.

The Rural and Regional Affairs committee, in an interim report tabled late on Wednesday, also calls for tax incentives to encourage locals to invest in farmland and says foreign governments often invest here to shore up food security, rather than for commercial reasons.

Committee chairman Liberal Senator
Bill Heffernan
said the review should extend beyond just agriculture to all industries, amid concerns about revenue leakage, which he said were highlighted by the government’s recent claims that Google was minimising its tax bill.

He was concerned there was production in Australia that “bypasses the revenue base and commercial market which could lead to distortion of capital, distortion of commodity markets and distortion of the revenue base".

The committee will not finalise its report on the Foreign Investment Review Board’s national interest test until next year, but Senator Heffernan said: “given the urgency to deal with the inadequacy of Tax Act and the Foreign Takeovers Act we needed to get this out now".

The government last week released new transfer pricing laws, designed to target multinationals minimising their tax bills. The committee said it heard evidence of tax incentives or loopholes benefiting foreign investors in agriculture over locals. “This was coupled with evidence suggesting there is scope for foreign government entities to avoid fair tax liabilities in Australia," it says. “The erosion of the tax base from multinational companies reducing their tax liabilities is a direct threat to Australia’s sovereignty."

Evidence to the committee suggested that a foreign government-owned entity investing in Australia and exporting for non-commercial purposes, for instance to feed its people, could avoid paying tax. “The government should unambiguously rule out such a possibility, or if it is unable to, it should explain why tax revenue leakage from foreign investment in these circumstances is warranted," the report says.